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HORACE MANN EDUCATORS CORP /DE/ (HMN)·Q3 2025 Earnings Summary

Executive Summary

  • Record core EPS of $1.36, up 64% year over year; GAAP diluted EPS $1.40; total revenues $438.5M (+6.4% YoY). Property & Casualty combined ratio improved >10 pts to 87.8% on much lower catastrophe costs and strong underlying performance .
  • Raised FY2025 core EPS guidance to $4.50–$4.70 (from $4.15–$4.45), assuming ~$65M CAT losses, total net investment income $473–$477M, managed portfolio income $373–$377M; Q4 EPS implied at $1.00–$1.20 given seasonality and accelerated strategic investments .
  • Sales momentum across lines: Individual Supplemental and Group Benefits each delivered $6M in Q3 sales (Indiv. Supplemental +40% YoY; Group nearly doubled), Life sales +16%, Retirement deposits +9%; P&C net written premiums +9% YoY to $232M .
  • Capital actions and balance sheet: Issued $300M senior notes due 2030 at 4.7% coupon (5x oversubscribed), repurchased 470k shares for ~$20M YTD through October, with ~$57M buyback authorization remaining; tangible book value per share +9% YoY .
  • Catalyst for stock reaction: The combination of a material EPS beat versus consensus, guidance raise, and lower catastrophe losses supports estimate revisions and positive sentiment; management highlighted growing lead generation (website visits +120% YoY, online quotes nearly doubling) and segment profitability at or above targets .

What Went Well and What Went Wrong

What Went Well

  • “Record third-quarter core earnings underscore the strong profitability and sustained growth momentum… [and] catastrophe costs… meaningfully below prior year” — Marita Zuraitis (CEO) .
  • P&C profitability: combined ratio 87.8% (−10.1 pts YoY); Property combined ratio 75.3% with retention ~89%; Auto underlying combined ratio 94.9% improved 3 pts .
  • Supplemental & Group growth: Individual Supplemental sales +40% YoY; benefits ratio 25.4% (−2.4 pts YoY) on favorable morbidity/utilization; Group Benefits record sales; benefits ratio 35.7% below prior year .

What Went Wrong

  • Auto household retention decreased to 84% (still top quartile vs industry); management flagged Q4 auto frequency seasonality historically higher due to weather .
  • Near-term expenses to be elevated as the company accelerates growth investments (lead generation, distribution, modernization); corporate and other expenses increased by $5M in guidance .
  • Actuarial reviews: GAAP-only, non-cash reserve impacts (Life −$3.5M; Retirement +$5.4M pre-tax) and pension plan termination to drive a non-core charge in Q4 (offset by >$1M annual pre-tax run-rate savings) .

Financial Results

MetricQ1 2025Q2 2025Q3 2025Q3 2025 Consensus*
Revenue ($USD Millions)$416.4 $411.7 $438.5 $430.9*
GAAP Diluted EPS ($)$0.92 $0.71 $1.40 —
Core EPS ($)$1.07 $1.06 $1.36 $1.11*
P&C Combined Ratio (%)89.4% 97.0% 87.8% —
Core ROE - LTM (%)10.6% 12.6% 13.8% —

Notes: *Values retrieved from S&P Global.

Segment performance and KPIs (Q3 2025):

  • P&C: core earnings $32M (tripled YoY); net written premiums $232M (+9% YoY); prior-year development +$3M (favorable property severity); pre-tax CAT losses $10M (−71% YoY) .
  • Auto: NWP $132M; underlying combined ratio 94.9%; household retention 84% .
  • Property: NWP $99M (+20% YoY); combined ratio 75.3%; retention ~89% .
  • Life & Retirement: core earnings $15M (in line YoY); net written premiums and contract deposits $170M; Life persistency ~96%; Retirement persistency 92% .
  • Supplemental & Group: segment core earnings $18M (in line YoY); net written premiums $66M; Individual Supplemental NWP $31M (+3% YoY), benefits ratio 25.4%; Group NWP $35M (+8% YoY), benefits ratio 35.7%; each posted $6M sales in Q3 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core EPS (non-GAAP)FY 2025$4.15–$4.45 $4.50–$4.70 Raised
Catastrophe Losses (pre-tax)FY 2025~$90M (5-yr avg) ~$65M Lower assumption
Total Net Investment IncomeFY 2025$470–$480M $473–$477M Narrowed
Managed Portfolio IncomeFY 2025$370–$380M $373–$377M Narrowed
Corporate & Other ExpensesFY 2025$35–$40M +$5M vs prior plan Increased
Foundation DonationQ4 2025N/A$3–$7M New
P&C Combined Ratio TargetsLT (2026+)Auto mid-90s; Property ≤90 Auto mid-90s; Property ≤90 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q3 2025)Trend
AI/Technology initiativesQ1: Launch of Catalyst CRM; omnichannel capabilities; new money yields exceeding book yield 13th consecutive quarter . Q2: Website traffic +75% YoY; lead generation and distribution scaling .GenAI pilot automating call summary notes (20–30% of rep day), matched human accuracy, enabling expense savings via attrition; expanding GenAI framework .Increasing adoption; early productivity gains.
P&C catastrophe mitigationQ1: Roof schedules, water claim mgmt; modeling drives CAT guidance; CA rate approvals (Auto +14.5%; Property ~20%) . Q2: Favorable CATs, lower frequency/severity; maintained ~$90M CAT guide prudently .YTD CATs >1 std dev below history; FY CAT assumption cut to ~$65M; non-rate actions (deductibles, schedules) working; caution: do not expect significant decline in 2026 actual CAT dollars .Structural mitigation continues; weather exogenous; cautious stance.
Distribution/Lead generationQ1: 40% increase in website visitors; added supplemental to online quoting . Q2: Points of distribution growing; PIF stabilizing; auto sales momentum .Website visits +120% YoY; online quotes nearly doubling; partnerships with TFA, GCU; Crayola Creativity Week sponsorship .Accelerating reach and educator engagement.
Capital managementQ1: Dividend increased (17th consecutive year); $7M buybacks YTD . Q2: $13M buybacks through July; $63M remaining authorization .Issued $300M notes @4.7% coupon; ~$20M buybacks through Oct; ~$57M remaining authorization; strong dividend yield .Active balance sheet optimization; continued returns.
Regulatory/TaxQ1: CA rate approvals (Auto 14.5%; Property ~20%) .Leveraging tax provisions under “Big Bill” legislation to fund $3–$7M foundation donation .Ongoing regulatory navigation; tax optimization for mission.

Management Commentary

  • “We are increasing our full-year 2025 core EPS guidance to a range of $4.50 to $4.70. We continue to execute on our strategy to drive sustained, profitable growth…” — Marita Zuraitis (CEO) .
  • “Core earnings of $57 million or $1.36 per share increased 64% over the prior year… P&C reported combined ratio of 87.8 improved 10.1 points over prior year…” — Ryan Greenier (CFO) .
  • “By automating [call notes]… 20%-30% of a representative’s day… AI-generated call notes matched the accuracy and quality of human-authored notes.” — Marita Zuraitis (CEO) .
  • “We issued $300 million of senior notes due in 2030 at a 4.7% coupon… more than five times oversubscribed… record-tight spread.” — Ryan Greenier (CFO) .
  • “We are confident in… a 10% average CAGR in core EPS and a sustained 12%-13% core ROE by 2028.” — Marita Zuraitis (CEO) .

Q&A Highlights

  • Policy growth and retention: Management emphasized sustained household growth across lines; Auto retention at 84% amid competitive rate environment, expected to stabilize and improve as rate actions moderate .
  • Guidance bridge to Q4: Q4 EPS guided to $1.00–$1.20; drivers include normalized seasonality (auto frequency), narrowed NII range, +$5M corporate spend, foundation donation; prior-year Q4 included non-repeatable items (~$0.55 total) .
  • Supplemental & Group capabilities: Use of an experienced lead management partner; individual supplemental growth from more sellers and rising productivity; group still small and lumpy but scaling .
  • Investments/alternatives: “Best-of-breed” external managers across verticals; educator demand remains conservative; no near-term need for more exotic products (e.g., interval/evergreen funds) .
  • CAT outlook and P&C normalization: Non-rate actions working; 2025 CATs more than one std dev below history; do not expect significant decline in 2026 actual CAT dollars; targets remain Auto mid-90s and Property ≤90 .

Estimates Context

Q3 2025 actual vs Wall Street consensus (S&P Global):

  • EPS: $1.36 vs $1.11 consensus — bold beat .
  • Revenue: $438.5M vs $430.9M consensus — bold beat .

Forward consensus (S&P Global):

MetricQ4 2025Q1 2026
EPS ($)1.257*1.225*
Revenue ($USD Millions)444.7*451.2*

Notes: *Values retrieved from S&P Global.

Implications: The EPS and revenue beats, combined with the guidance raise and lower CAT assumption, suggest upward estimate revisions, particularly for FY2025 EPS and near-term P&C profitability assumptions .

Key Takeaways for Investors

  • Material EPS and revenue beats vs consensus and guidance raise to $4.50–$4.70 underpin positive estimate momentum; Q4 EPS implied at $1.00–$1.20 reflects seasonality and planned investments .
  • P&C profitability has inflected: combined ratio 87.8% on lower CATs and favorable severity; Property combined ratio 75.3% and retention ~89% signal durable underlying improvements .
  • Growth engines scaling: Supplemental & Group record sales, improved benefits ratios; Life & Retirement stable earnings with strong persistency; lead gen metrics accelerating (visits +120% YoY, online quotes nearly doubling) .
  • Expense optics: Near-term elevations are deliberate to build scale; pension plan termination drives non-core Q4 charge but >$1M annual pre-tax savings; GenAI pilots show measurable productivity benefits .
  • Capital flexibility: $300M notes at 4.7% (tight spread), ongoing buybacks ($20M YTD; ~$57M remaining), strong dividend — supports TSR while funding growth .
  • Risk watch: Auto retention at 84% and Q4 frequency seasonality; management maintains prudent CAT planning (not extrapolating a light year) and targets (Auto mid-90s, Property ≤90) .
  • Strategic narrative: Diversified educator-focused model delivering high-quality earnings, with long-term targets of ~10% core EPS CAGR and 12–13% core ROE by 2028 guiding medium-term thesis .

Additional Relevant Press Releases (Q3 2025 context)

  • Partnerships expanding educator reach: Teach For America collaboration for financial wellness; Grand Canyon University alumni engagement; Crayola Creativity Week sponsorship to broaden educator engagement and brand awareness .